Danske Bank has revised up its 2025 growth forecast for Northern Ireland – although it expects growth to slow in 2026.
The bank has increased its growth forecast for 2025 to 1.3%, up from 1.1%, a level that still leaves NI slightly behind the UK forecast growth of 1.4%.
Looking to 2026 however, the bank expects growth in Northern Ireland to fall backwards, “as inflation, taxes and uncertainty continue to weigh on the economy”.
The latest publication of Danske’s Northern Ireland Quarterly Sectoral Forecasts report highlighted contrasting outlooks for different sectors in Northern Ireland.
It expects a Gross Value added (GVA) for the professional, scientific and technical services sector of 2%, while it expects 1.9% growth in the information & communication sector.
Wholesale and retail trade are projected to record growth in 2025 of 1.7%, while accommodation and food service is anticipated to have grown by 1.5% this year.
Weaker growth is expected for the manufacturing sector, with the bank projecting a 1.6% increase in 2025 and a 0.7% rise in 2026, something it attributes to “high business costs, skills shortages and trade uncertainty.”
Conor Lambe, Chief Economist at Danske Bank, said: “Economic growth is expected to remain sluggish in both Northern Ireland and the wider UK in 2026.
Danske Bank chief economist Conor Lambe
“Inflation is projected to remain above target, higher taxes are likely to constrain activity and ongoing uncertainty will likely continue to weigh on the economy.
“However, we expect the gradual loosening of monetary policy to continue, which should provide some support to consumer spending and business investment, while higher government spending is also likely to contribute to economic growth.”
Danske believes the annual number of employee jobs will rise at around 2% for the year 2025, while expecting this to slow down to 0.6% in 2026.
It believes the unemployment rate here will sit at 2.3% this year, and increase slightly to 2.6% in 2026.
Business services are expected to have a “mixed” jobs performance this year, with information and communication jobs expected to have fallen by 2.4%.
The construction sector is expected to have seen a growth in jobs of over 5% this year.
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However, jobs in the administrative and support services, and professional, scientific and technical services sectors are expected to have gone up this year, resulting in a net rise in these three sectors above the general employment growth rate.
Construction has seen a notable growth in employee numbers, and is expected to report a 5.3% rise for this year.
Danske Bank emphasised that there are risks and uncertainties surrounding its forecast. Mr Lambe said: “Elevated uncertainty in the global economy remains a risk to the economic outlook.
“If trade or geopolitical uncertainty is more severe or lasts longer than anticipated, the UK and Northern Ireland economies could be more constrained than forecast.
“We expect inflation to average around 3.4% in 2025 and then fall to an average of about 2.6% next year, but there are risks to this forecast.
“Higher than projected inflation could lead to diminished consumer purchasing power and weaker prospects for economic growth.
“In addition, monetary policy may need to remain tighter than expected, which could further weigh on economic activity.”